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CALGARY, ALBERTA--(Marketwire - Nov. 7, 2012) - PetroBakken Energy Ltd. (the "Company" or "PetroBakken") (TSX:PBN) is pleased to provide an operations update and to announce our third quarter financial and operating results.
CURRENT OPERATING HIGHLIGHTS
-- Early November production is approximately 45,000 barrels of oil
equivalent per day ("boepd"), based on field estimates, with 53 net
wells in inventory waiting to be completed or brought on stream.
-- For the balance of 2012, we plan on drilling 42 net wells and bringing
74 net wells on production.
-- A new facility in our Cardium business unit at Brazeau is expected to be
completed by the end of November, allowing us to bring on incremental
production in excess of 2,500 boepd.
-- We are accelerating a portion of Q1 2013 capital program into the fourth
quarter of this year and expect 2012 capital expenditures of $975
million prior to dispositions ($340 million net of dispositions), which
will positively impact our 2013 production rates.
-- As part of our capital plan expansion, we have acquired 218 net sections
of land in a new potential resource play area, bringing our new prospect
land inventory to 512 net sections.
-- We are currently running 17 drilling rigs, 6 fracing spreads and 13
completion service rigs.
THIRD QUARTER FINANCIAL & OPERATING HIGHLIGHTS
(In this press release, quarterly comparisons are third quarter 2012 compared to third quarter 2011, and the first nine months of 2012 compared to the first nine months of 2011 unless otherwise noted.)
-- Third quarter production averaged 38,503 boepd (82% light oil and
liquids), relatively flat over the third quarter of 2011, due primarily
to the disposition of producing assets in the first half of 2012 and a
delayed start to the second half 2012 capital program.
-- Nine month production averaged 41,303 boepd, a 7% increase over the same
period in 2011.
-- Our operating netback for the third quarter was $45.09/boe, influenced
by lower realized commodity prices, as light oil differentials to WTI
were wider than historical levels.
-- Funds flow from operations was $122 million ($0.65 per basic share) for
the quarter, a 20% decrease over the third quarter of 2011, primarily
due to lower realized commodity prices.
-- Capital expenditures before dispositions totalled $283 million in the
third quarter, resulting in 82 net wells drilled.
-- Net income was $24 million ($0.13 per basic share) for the third
quarter.
Summary of Results
----------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
----------------------------------------------------------------------------
2012 2011 2012 2011
----------------------------------------------------------------------------
Oil and natural gas sales 237,833 272,346 808,399 828,595
Funds flow from operations (1) 122,037 152,357 428,754 478,734
Per share - basic ($) 0.65 0.81 2.28 2.56
Adjusted Net income(1) 27,449 29,671 155,767 138,938
Per share - basic ($) 0.15 0.16 0.83 0.74
Net Capital Expenditures(1) 275,233 271,786 (36,410) 669,688
Net debt (1) 1,500,655 1,338,425 1,500,655 1,338,425
Dividends per share ($) 0.24 0.24 0.72 0.72
Cash dividends per share ($) 0.09 0.24 0.31 0.72
Common Shares, end of period (000)
(2) 189,704 187,237 189,704 187,237
Operating netback ($/boe) (1) (3)
(4) 45.09 50.04 48.00 52.89
Average daily production (3) (boe) 38,503 39,074 41,303 38,636
----------------------------------------------------------------------------
(1) Non-GAAP measure. See "Non-GAAP Measures" section.
(2) Denotes basic common shares outstanding.
(3) Six Mcf (thousand cubic feet) of natural gas is equivalent to one barrel
of oil equivalent ("boe").
(4) Net of transportation expenses.
CURRENT OPERATIONS UPDATE
Our activity has continued at a strong pace since the end of September, and we currently have 17 drilling rigs, 6 fracing spreads and 13 completion service rigs working in the field. Since the end of the third quarter, we have drilled 41 net wells and brought 31 net wells on production, with a current inventory of 53 wells waiting to be completed or brought on production. As expected, the execution of our program has increased production from 39,200 boepd in September to 45,000 boepd in early November, based on field estimates.
2012 CAPITAL EXPENDITURES
We are updating our forecasted 2012 capital expenditures to $975 million, prior to dispositions ($340 million after dispositions). This increase reflects an active land acquisition strategy in a potential new resource play in which we accumulated 218 net sections and an acceleration of certain 2013 capital investments in drilling and completions, facility construction, and optimization efforts which we expect to positively impact production results in early 2013. As part of our plan, we will be drilling an additional 15 net Cardium wells, while partially offsetting this effort by reducing our Bakken business unit drilling count by 10 net wells, which were targeting Mississippian opportunities. Facility and optimization capital that is being accelerated, particularly in southeast Saskatchewan, will allow us to increase production and should reduce downtime during spring break-up in 2013. Given the timing of this capital acceleration there will be minimal impact on 2012 production rates, as the majority of the impact will be seen in the first quarter of 2013. We are maintaining our 2012 exit rate production guidance of 52,000 to 56,000 boepd.
OPERATING RESULTS
Our third quarter average production of 38,503 boepd was comprised of 15,767 boepd from the Bakken business unit, 14,721 boepd from the Cardium business unit, and the remainder from the Saskatchewan Conventional and AB/BC business units. A delayed start to our second half capital program resulted in third quarter production levels being flat to the second quarter. However, reduced industry activity during the second half of 2012 has provided increased access to services, allowing us to catch up on our drilling program. The results of this activity will be realized in the fourth quarter.
Average Daily Production
Three months ended Nine months ended
September 30, 2012 September 30, 2012
Oil &NGL Gas Total Oil &NGL Gas Total
Business Unit (bbl/d) (Mcf/d) (boe/d) (bbl/d) (Mcf/d) (boe/d)
----------------------------------------------------------------------------
Bakken 15,007 4,561 15,767 16,182 5,516 17,102
Conventional (SE SK) 5,205 1,391 5,437 5,346 1,412 5,581
Cardium (central AB) 10,625 24,577 14,721 12,224 21,036 15,730
Alberta/BC 825 10,519 2,578 981 11,456 2,890
----------------------------------------------------------------------------
31,662 41,048 38,503 34,733 39,420 41,303
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Production expenses on a per boe basis were 7% lower in the third quarter of 2012 as compared to the second quarter. This decrease was primarily due to reduced trucking costs resulting from the completion of our new Cardium facility. Production expenses for the first nine months of 2012 were relatively consistent to 2011 on a unit of production basis and slightly higher on a total basis due to increased production.
Q3 2012 Drilling Activity
Drilled Completed On Production Inventory(1)
Business Unit Gross Net Gross Net Gross Net Gross Net
----------------------------------------------------------------------------
Bakken 48 40 39 30 42 31 18 17
Conventional (SE SK) 19 10 17 8 14 6 8 3
Cardium (central AB) 43 32 12 8 18 15 31 23
Alberta/BC - - - - - - - -
----------------------------------------------------------------------------
Total 110 82 68 46 74 52 57 43
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Inventory refers to the number of wells pending completion and/or tie-
in.
The majority of the capital expenditures in the third quarter were focused on drilling and completions following spring break-up. We executed an aggressive program that represented a 4% increase over the same period last year. Drilling activity focused primarily on the Bakken and Cardium business units, where 40 and 32 net wells were drilled, respectively, with an additional 10 net wells drilled in our Saskatchewan Conventional business unit. We completed 46 net wells during the quarter, including 30 net wells in the Bakken business unit and 8 net wells in each of the Cardium and Saskatchewan Conventional business units. The production resulting from this activity, including bringing on the 43 net wells in inventory at the end of the quarter, will largely be realized in the fourth quarter.
Bakken Business Unit
In southeast Saskatchewan, the Bakken business unit averaged 15,767 boepd of production, an increase of six percent over the second quarter, as the majority of our shut-in production related to spring break-up conditions was restored. Drilling activity increased throughout the third quarter, resulting in 40 net wells drilled and 31 net wells brought on production. Currently, we have 7 drilling rigs operating in this business unit and have drilled 17 net wells since quarter-end, with 15 net wells waiting to be completed or brought on production.
Cardium Business Unit
In Alberta, the Cardium business unit averaged 14,721 boepd of production, a decrease of seven percent from the second quarter of 2012, due to a delayed start to our second half capital program and restricted production and downtime resulting from routine maintenance of individual wells and facilities. A battery and a gathering system expansion in the Brazeau area of West Pembina is expected to be completed by the end of November, which will significantly reduce current well restrictions, reduce trucking expenses and add over 2,500 boepd of production. During the quarter we drilled 32 net wells and brought 15 net wells on production in the Cardium, most of which were in the last half of the quarter and had minimal impact on production during the period. We currently have 8 drilling rigs operating in the Cardium and have drilled 16 net wells since the end of September, with 29 net wells in inventory waiting to be completed or brought on production.
Other Activity
Our southeast Saskatchewan Conventional business unit continues to provide a low decline, light oil production base. Production averaged 5,437 boepd in the third quarter of 2012, and we drilled 10 net wells. Two drilling rigs are currently operating in this area.
In our Alberta/BC business unit, we have 2,578 boepd of production and have compiled an inventory of over 294 net sections of land prospective for new oil resource plays in one or more of the Nordegg, Montney, Duvernay and Swan Hills zones. We plan to drill 6 wells in the fourth quarter targeting the Swan Hills or Montney zones. In addition, we have now accumulated 218 net sections of land through Crown sales in another new potential resource play area.
FINANCIAL RESULTS
Our production of 38,503 boepd and operating netback of $45.09/boe resulted in funds flow from operations of $122 million ($0.65 per basic share) for the third quarter, a 20 percent decrease over the same period in 2011 due primarily to lower realized oil prices and higher interest costs. Our adjusted net income for the third quarter was approximately $27 million ($0.15 per basic share), similar to the third quarter of 2011, largely resulting from a 10% lower operating netback and unrealized risk management loss (due to a rising WTI price) being offset by a non-cash foreign exchange gain (due to a stronger Canadian dollar versus the US dollar). Capital expenditures were in line with the third quarter of 2011, but are expected to be higher in the fourth quarter this year compared to last year.
Realized wellhead commodity prices in the third quarter were weaker this year than last year. WTI prices in the quarter were 4% higher than last year but were volatile, and wider oil differentials caused our realized prices to be approximately 8% lower than the third quarter of 2011. Oil differentials improved each month during the quarter, with September being slightly narrower than the historical average. However, taken as a whole, our average third quarter 2012 differential to WTI was approximately 12%, compared to 1% last year. The improvement in differentials during the quarter has been supported by the expansion of rail capacity to move oil, but we expect differentials to widen again due to major refinery turnarounds occurring in the fourth quarter of 2012 and the first quarter of 2013.
Our monthly dividend of $0.08 per share has remained constant since the Company's inception. During the third quarter, total dividends of $45 million were declared. The dividend represented 37% of funds flow from operations for the quarter; however participation in our Dividend Reinvestment Plan is at 62%, resulting in cash dividends of approximately $17 million, or 14% of quarterly funds flow from operations.
As at September 30, 2012, PetroBakken had $0.4 billion of debt drawn on our $1.4 billion credit facility. We currently have $1.0 billion of available credit and a debt capital structure with diversified sources of credit and a layered maturity profile that compliments the long term nature of our light oil-focused assets.
We remained active with our Normal Course Issuer Bid, purchasing approximately 493,000 shares in the third quarter at a total cost of $6.4 million ($13.09/share). Year-to-date, we have purchased approximately 3.8 million shares at a total cost of $51.7 million ($13.51/share).
OUTLOOK
Beginning in the third quarter, drilling activity levels increased as we ramped up the execution of our 2012 drilling program. This activity has continued into the fourth quarter, during which we plan to drill a further 83 wells and bring an additional 105 wells onto production. The addition of these new wells to our early November production rate of approximately 45,000 boepd, together with the removal of current production restrictions caused by facility constraints, puts us on pace to meet our forecast 2012 exit production rate of 52,000 boepd to 56,000 boepd.
PETROBANK REORGANIZATION
On October 29, 2012, PetroBakken and Petrobank entered into an arrangement agreement that will see Petrobank shareholders receive Petrobank's proportionate interest in PetroBakken (the "Reorganization"). Pursuant to the Reorganization, a new Alberta corporation will be formed ("New Petrobank") which will acquire all of the existing assets and liabilities of Petrobank, including THAI(R) and related technologies, but excluding Petrobank's ownership interest in PetroBakken shares, and existing shareholders of Petrobank will receive one share of New Petrobank for each Petrobank share held.
Following this distribution of Petrobank's heavy oil business to New Petrobank, Petrobank and PetroBakken will, through a series of transactions, amalgamate, with the resulting company to continue under the name "PetroBakken Energy Ltd." ("New PetroBakken"). Existing PetroBakken shareholders will receive one share of New PetroBakken for every share of PetroBakken held prior to the Reorganization and Petrobank shareholders will receive, in aggregate, a number of New PetroBakken shares equal to the number of PetroBakken shares held by Petrobank immediately prior to the Reorganization, approximately 1.06 to 1.10 New PetroBakken shares for each Petrobank share held. The number of shares outstanding in New PetroBakken will be the same as the number of shares outstanding in PetroBakken immediately prior to the Reorganization.
The Reorganization will not result in any changes to the business of PetroBakken or our existing Board and senior management. The Reorganization is subject to the approval of the shareholders of each of Petrobank and PetroBakken.
THIRD QUARTER FINANCIAL & OPERATING TABLES
The following table provides a summary of PetroBakken's financial and operating results for the three and nine months ended September 30, 2012 and 2011. The interim consolidated financial statements with Management's Discussion and Analysis ("MD&A") are available on the Company's website at www.petrobakken.com and will be available on the SEDAR website at www.sedar.com.
Three months ended
September 30,
----------------------------------------------------------------------------
2012 2011 % change
----------------------------------------------------------------------------
Financial ($000s, except where noted)
Oil and natural gas sales 237,833 272,346 (13)
Funds flow from operations (1) 122,037 152,357 (20)
Per share - basic ($) 0.65 0.81 (20)
- diluted ($)(2) 0.62 0.76 (18)
Adjusted Net income(1) 27,449 29,671 (7)
Per share - basic ($) 0.15 0.16 (6)
- diluted ($) 0.14 0.16 (13)
Net Capital expenditures(1) 275,233 271,786 1
Total assets 6,131,988 6,346,447 (3)
Net debt (1) 1,500,655 1,338,425 12
Total debt(1) 1,795,765 2,117,600 (15)
Dividends 45,392 44,880 1
Per share ($) 0.24 0.24 -
Cash dividends 17,224 44,880 (62)
Per share ($) 0.09 0.24 (63)
Payout ratio (%)(1) 37 29 28
Cash payout ratio (%)(1) 14 29 (52)
Common shares, end of period (000)
Basic 189,704 187,237 1
Diluted(2) 214,817 220,261 (2)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operations
Oil, NGL and natural gas revenue (3) 66.58 75.67 (12)
Royalties 9.09 12.20 (25)
Production expenses 12.40 13.13 (6)
----------------------------------------------------------------------------
Operating netback ($/boe) (1) (4) 45.09 50.04 (10)
Average daily production (4)
Oil and NGL (bbls) 31,662 33,112 (4)
Natural gas (Mcf) 41,048 35,776 15
----------------------------------------------------------------------------
Total (boe) 38,503 39,074 (1)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Nine months ended September 30,
----------------------------------------------------------------------------
2012 2011 % change
----------------------------------------------------------------------------
Financial ($000s, except where noted)
Oil and natural gas sales 808,399 828,595 (2)
Funds flow from operations (1) 428,754 478,734 (10)
Per share - basic ($) 2.28 2.56 (11)
- diluted ($)(2) 2.19 2.36 (7)
Adjusted Net income(1) 155,767 138,938 12
Per share - basic ($) 0.83 0.74 12
- diluted ($) 0.82 0.73 12
Net Capital expenditures(1) (36,410) 669,688 -
Total assets 6,131,988 6,346,447 (3)
Net debt (1) 1,500,655 1,338,425 12
Total debt(1) 1,795,765 2,117,600 (15)
Dividends 136,112 134,692 1
Per share ($) 0.72 0.72 -
Cash dividends 59,501 134,692 (56)
Per share ($) 0.31 0.72 (57)
Payout ratio (%)(1) 32 28 14
Cash payout ratio (%)(1) 14 28 (50)
Common shares, end of period (000)
Basic 189,704 187,237 1
Diluted(2) 214,817 220,261 (2)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operations
Oil, NGL and natural gas revenue (3) 71.04 77.98 (9)
Royalties 10.26 12.36 (17)
Production expenses 12.78 12.73 -
----------------------------------------------------------------------------
Operating netback ($/boe) (1) (4) 48.00 52.89 (9)
Average daily production (4)
Oil and NGL (bbls) 34,733 32,965 5
Natural gas (Mcf) 39,420 34,030 16
----------------------------------------------------------------------------
Total (boe) 41,303 38,636 7
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Non-GAAP measure. See "Non-GAAP Measures" section.
(2) Consists of common shares, stock options, deferred common shares, and
incentive shares on the same basis as net income. Convertible debentures
have been included as at the period end date based on the conversion
price as of that date.
(3) Net of transportation expenses.
(4) Six Mcf (thousand cubic feet) of natural gas is equivalent to one barrel
of oil equivalent ("boe").
INVESTOR CONFERENCE CALL
Management of PetroBakken will be holding a conference call for investors, financial analysts, media and any interested persons on Thursday, November 8, 2012 at 9:00 a.m. (MST) (11:00 a.m. EST) to discuss PetroBakken's third quarter financial and operating results.
The investor conference call details are as follows:
Live call dial-in number: 1-800-745-8951
Replay dial-in numbers: 1-416-626-4100 / 1-800-558-5253
Reservation number: 21610564
Live audio webcast link: http://events.digitalmedia.telus.com/petrobakken/110812/index.php
PetroBakken Energy Ltd. is an oil and gas exploration and production company combining light oil Bakken and Cardium resource plays with conventional light oil assets, delivering industry leading operating netbacks, strong cash flows and production growth. PetroBakken is applying leading edge technology to a multi-year inventory of Bakken and Cardium light oil development locations, along with a significant inventory of opportunities in the Horn River and Montney gas resource plays in northeast BC. Our strategy is to deliver accretive production and reserves growth, along with an attractive dividend yield.
Non-GAAP Measures. This press release contains financial terms that are not considered measures under IFRS, such as funds flow from operations, adjusted net income, funds flow per share, adjusted net income per share, payout ratio, net debt, total debt, operating netback and net capital expenditures. These measures are commonly utilized in the oil and gas industry and are considered informative for management and stakeholders. Specifically, funds flow from operations reflects cash generated from operating activities before changes in non-cash working capital. Adjusted net income is determined by adding back any losses or deducting any gains on the derivative liabilities, adding back any losses or deducting any gains on settlement of convertible debentures, and adding back impairments. Payout ratio is determined as dividends paid as a percentage of funds flow from operations. Management considers funds flow from operations, funds flow per share, adjusted net income, adjusted net income per share, and payout ratio important as it helps evaluate performance and demonstrate the ability to generate sufficient cash to fund future growth opportunities, pay dividends and repay debt. Net debt includes bank debt outstanding plus accounts payable less accounts receivable and prepaid expenses plus the full value outstanding on the senior unsecured notes converted to Canadian dollars at the exchange rate on the period end date. Total debt includes net debt plus the full value outstanding on the convertible debentures converted to Canadian dollars at the exchange rate on the period end date. Net debt and total debt are used to evaluate PetroBakken's financial leverage. Profitability relative to commodity prices per unit of production is demonstrated by an operating netback. Operating netback reflects revenues less royalties, transportation costs, and production expenses divided by production for the period. Net capital expenditures represent capital expenditures, including exploration and evaluation expenditures, less proceeds from asset dispositions. Funds flow from operations, funds flow per share, adjusted net income, adjusted net income per share, payout ratio, net debt, total debt, operating netbacks, and net capital expenditures may not be comparable to those reported by other companies nor should they be viewed as an alternative to cash flow from operations or other measures of financial performance calculated in accordance with IFRS. Further information in respect of these non-GAAP measures is set forth in our MD&A.
Forward Looking Statements. Certain information provided in this press release constitutes forward-looking statements. Specifically, this press release contains forward-looking statements relating to financial results, results from operations, future production rates, proposed exploration and development activities, our drilling prospect inventory, projected costs, the timing of certain projects, our future debt levels and liquidity position and the terms of and timing for completion of the Reorganization. The forward-looking statements are based on certain key expectations and assumptions, including expectations and assumptions concerning the availability of capital, the success of future drilling, completion, recompletion and development activities, the performance of new and existing wells, prevailing commodity prices and economic conditions, the availability of labour and services, weather and access to drilling locations, the geological nature of the formations targeted and the receipt of required shareholder and regulatory approvals and satisfaction of other conditions to the Reorganization. Although we believe that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because we can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, reliance on industry partners, availability of equipment and personnel, uncertainty surrounding timing for drilling and completion activities resulting from weather and other factors, changes in applicable regulatory regimes and health, safety and environmental risks), commodity price and exchange rate fluctuations, general economic conditions and risks associated with the approval of the Reorganization by our shareholders, the receipt of regulatory approvals and the satisfaction of other conditions to the Reorganization. Certain of these risks are set out in more detail in our Annual Information Form which has been filed on SEDAR and can be accessed at www.sedar.com. Except as may be required by applicable securities laws, PetroBakken assumes no obligation to publicly update or revise any forward-looking statements made herein or otherwise, whether as a result of new information, future events or otherwise.
Natural gas volumes have been converted to barrels of oil equivalent ("boe"). Six thousand cubic feet ("Mcf") of natural gas is equal to one barrel of oil equivalent based on an energy equivalency conversion method primarily attributable at the burner tip and does not represent a value equivalency at the wellhead. Boes may be misleading, especially if used in isolation.
FOR FURTHER INFORMATION PLEASE CONTACT:
PetroBakken Energy Ltd.
John D. Wright
President and Chief Executive Officer
(403) 268-7800
PetroBakken Energy Ltd.
Peter D. Scott
Senior Vice President and Chief Financial Officer
(403) 268-7800
PetroBakken Energy Ltd.
Bill A. Kanters
Vice President Capital Markets
(403) 268-7800
ir@petrobakken.com
www.petrobakken.com
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